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The IMF believes that Bitcoin has become a necessary financial tool to preserve wealth amid financial instability
Bitcoin (BTC) is increasingly becoming a key channel for cross-border financial flows amid global financial instability, according to a new report from the International Monetary Fund (IMF).
The report, titled “A Primer on Bitcoin Cross-Border Flows,” sheds light on how the decentralized nature of Bitcoin is being exploited to circumvent traditional banking systems, particularly in regions experiencing economic distress or subject to strict bank controls. capital.
Essential financial tool
According to the IMF, residents of countries with restrictive financial regulations are turning to Bitcoin to move their capital more freely across borders.
The authors wrote:
“Off-chain cross-border flows appear correlated with incentives to avoid restrictions on capital flows.”
The report highlights significant transaction volumes from countries like Argentina and Venezuela, where citizens face hyperinflation and strict financial controls.
In these regions, Bitcoin has become a necessary financial tool to preserve wealth and access global markets rather than mere speculative investment.
However, the IMF report also warns of potential risks associated with the widespread use of Bitcoin for cross-border flows.
The lack of oversight and anonymity offered by cryptocurrencies can complicate regulators’ efforts to monitor and control financial transactions to prevent illicit activities such as money laundering.
On-Chain Volume
The study examined on-chain and off-chain transaction data to explore trends behind Bitcoin usage across borders. It revealed that Bitcoin transactions are not only substantial in terms of volume, but also have unique characteristics compared to traditional capital flows.
Unlike typical foreign investments that are sensitive to economic indicators such as currency strength, Bitcoin flows have a higher correlation with cryptocurrency-specific sentiments, such as market volatility and user sentiment indices, such as the Fear and Greed Index.
The analysis also highlighted that on-chain Bitcoin transactions, which are recorded on the blockchain and provide more security, tend to be larger than off-chain transactions. This indicates that the strong security features of blockchain technology often protect against larger financial stakes.
The IMF has called for international cooperation and regulatory frameworks which encompass the unique aspects of digital assets. Such measures would help mitigate risks while harnessing the benefits of digital currencies, including as tools for economic freedom in countries with restrictive financial environments.